Europa Oil & Gas has just started drilling in Lincolnshire, part of a long tradition of small companies hoping to strike "black gold" in Britain. But, whereas hope springs eternal in the minds of the oil men, Peak Oil came to Britain almost 10 years ago and many of the oil majors have come and gone.

Production – largely from the North Sea rather than onshore – reached 4.5m barrels a day (b/d) in 2000, but since then it has been on a downhill path and is now little more than 2.7m b/d. There have been endless attempts to revive interest in the sector by offering tax breaks and other incentives, but there is no greater incentive than high oil prices.

Currently, crude values are riding at the historically high level of $75 a barrel, which has encouraged the likes of Europa, but offshore exploration has dropped 57% in the first nine months of the year due to the difficulty of financing for smaller firms.

BP, Shell and the other oil majors still have a significant presence in the North Sea, but most of them are largely operating existing assets such as platforms and pipelines rather than trying to find new supplies.

To explore, develop and extract new supplies costs around $45 a barrel, according to the trade association Oil and Gas UK, which is well aware that places such as Saudi Arabia can produce oil for less than $10.

"Big companies have invested a lot over the decades on infrastructure, so there is no mass exodus," says a spokeswoman for the organisation. "But they often prioritise areas such as west Africa where the potential of really huge oil finds still remains."

This leaves Britain's oil search in the hands of small companies that need equity and bank debt to pay for their efforts. The tough lending and capital market environment makes their position difficult. This was highlighted last year by the collapse into receivership of Oilexco North Sea, which became bowed down by the weight of its spending commitments.

The most Britain can ask for in terms of new oil supplies is ensuring that as much as possible of the estimated 25bn barrels of reserves is brought from either the seabed or the earth. But only 6bn of this is currently being prepared for development, and annual spending has fallen from £6bn in 2006 to £4.8bn today, even though commodity prices have risen on average over that period.

Alistair Darling introduced financial measures in the last budget to encourage companies to develop smaller fields, but Oil & Gas UK says the regulations were written so tightly that only one operator stands to benefit. The trade body wants more help with tax breaks, but is not entirely downcast.

"In 1990, we thought investment and production would almost have petered out by 2010, and clearly that has not happened," the spokeswoman says. "In fact, because of a range of factors such as new technology, we can still see some kind of production continuing till 2040."